Q2 19/20

Nov 1, 2019

Quarterly report

But for standing by, it's a great pleasure to have with us the management of Cube Investments Limited for discussing Q2 FY 2020 earnings. And, from the management side, we are represented by Mr. Villain, who's the Managing Director and Mr. Mahindra Kumar, who's the CFO. I will now hand over the call to Mr. Villayan. Mr. Valayan, over to you, sir, and a big congrats for a good set of numbers. Thanks, Casher. Thanks a lot, and thanks for hosting this call again. Good morning, everybody. So, basically, the board met today. And, we've approved the financial results for the quarter ended 30th September. The, your overall your revenue is, down. We've had a drop of 18% over the same quarter last year. And that's mainly driven by the growth in the auto industry. The the good news is that our PBT is up at 111 growers, which is a growth of 31% over the same quarter last year. And, our path, obviously, because we benefit significantly from the reduction in tax rate goes up by almost 58%. Our return on capital employed has also improved. We've gone to 22% in the first half. And, the, our free cash flow is at 154 crores, which is at 86% to bat on a cumulative basis. One of the things we're also doing is, opting for the lower tax rate of 22 percent and recognizing the result in benefit over three quarters, this being the 1st quarter and then kind of, you know, the current and the next quarter as well. The, the fact for the overall business is that, was that 90 crores as against 57 crores in the same quarter last year. And, for the, I'll get into each of our individual businesses. Engineering business revenue was at 5 4 crores compared to 7.72 last year. And BBIT for that business was at 63 as against 65 crores. And, the ROCE for this division is at 36%, which is slightly lower than the 37% we had last year. Cycles and accessories, we basically had a revenue drop of 31%. One of the reasons is because we're also going slow on the institutional business. And our PBIC, here was 6 crores, again, 5 crores in the corresponding quarter of the previous year. Here I must really compliment the cycles team because in a tough market, they've, you know, and without kind of, you know, much revenue from the institutional business, we've still done a lot on the efficiency front to improve our performance there. Rosie, for the division, was there a 21% compared to 10% last year for the first half. On metal form products, our revenue was at 3.79 crores compared to 336 the same quarter last year, a growth of 13%. BBIT was at 40 versus 31. And, growth has come from railways, industrial chains, and fine banking, you know, and that has to help offset some of the degrowth in auto. ROCE for this division at 32 compared to 27. And on a consolidated basis, our revenue was at 1247 and our fat was at 93 crores as against 67 crores. Chanti gears, which is a subsidiary, and, had revenues of 71 crores as against 59. And that's a growth of 19%. P b PBT there the quarter was 12 as against 11 in the same quarter last year. So overall, I think we continue to be very optimistic about the future at the eye. And I just think that, you know, we just see there's a lot of opportunities, you know, whichever way the market goes over the next, year and the next couple of years. But, you know, I'll just talk with that commentary and be happy to kind of answer any questions, you know, that you all may have. Thank you. Anyone who wishes to ask a question, you may press star and 1 on your touch tone telephone. Participants are requested to use handsets while asking your questions. We will wait for a moment while the question The first question is from the line of Sagar Barrick from Deep Finance. Please go ahead. Yeah. Good morning, sir, and congratulations for excellent set of numbers. Yes. So my first question is on the gross margins. For this quarter, we saw one of the highest gross margins of 40.5%. So we have highlighted in the past about sourcing, you know, new different sourcing strategies, which will help our gross margins, but just wanted to get your sense that from, now onwards, do you think these gross margins are sustainable or is there a further improvement which is possible? Yeah. At the at the gross margin level, I think, you know, these are about the right numbers. You know, you know, obviously kind of what will continue to change is the overall mix of the business over time. And that might help us. But in some of the existing businesses, we, I mean, I think that this is a good set of numbers to work with. Though I do think that overall for PBT improvement, there's still quite a bit of headroom for growth. But at the at the gross margin level, I do think that for existing businesses, they should they should pay about the pay. So the the lower realization in terms of, steel prices going down would have also helped. Right? In the last couple of quarters. So, assuming steel prices go up from your, is there a chance that gross margins will fall, or, you think that it can be passed on. Yeah. It's to an extent. For us, it's kind of significantly moderated by the fact that, you know, in a lot of deal is just a pass through. You know, and we have to adjust for prices up, for prices down. To an extent, if you're you're correct, but, you know, for the most part, I would say that, you know, that doesn't affect us as much. Okay. Got it. Secondly, on the exports front, we have highlighted in the past that, you know, a lot of is there on the export. So, firstly, what was the export growth number for H1 and Q2? And, how much does it contribute in the total mix? Yeah. Actually, exports have been flat. And part of what we've seen is also that kind of an the existing segments that we're in, we've also seen a degrowth in terms of the export market. And so, you know, so that's part of the the part of the challenge we've had. So for the year, kind of exports has been flat versus last year. And how much does it contribute? Overall, it's about, 8, 9 to 21. Sorry, 8% to 9%. Yes. Okay. And on the cycle divisions, you highlight that, you know, there's still headroom for margin expansion from, the current levels also. So where do you see the sustainable margins going forward. So where do you see the demand picking up over there or, do you think that, you know, these kind of numbers will continue for the next, at least, couple of quarters? We have always said that I'm not a good predictor of whether demand is going to pick up or not, right? Our focus is to be ready for the situation where demand picks up. Our focus is to be, you know, but to be also be able to deliver, you know, profits at bottom line if demand does not pick up. Right? And from that perspective, what we're doing is a lot of belt tightening and also improving a lot. We've restructured our entire kind of logistic infrastructure in the country, to streamline it, you know, for the new environment. And a lot of the efficiency changes that we started making you know, have started yielding results. We've also done a lot of work on network working capital, bringing some of our inventories down and making that more efficient as well. So both from a, from a cash flow perspective and from a overall PBT perspective, some of the actions that we've taken to start a dealing fruit, but the team there is also significantly focused on on more opportunities. So we definitely see more of that coming in the coming year as well. So we're actually kind of very bullish about improving margins in that business. So about 4 to 5% that we have mentioned in the past looks like, it it'll come soon then. That's correct. Fair enough. And what is our, net debt number for, spills as on September? 298. 298. Okay. So we have repaid about 100 or 80 odd crores, I think. But as compared to beginning of the year, we were talking about almost 350. So Okay. Okay. Okay, great, sir. That's it from my side and wish you all the best. Next question is from the line of Kieran Kartik from Table Tree Investments. Please go ahead. Hi, good morning. Congratulations on a good set of numbers, sir. Sir, can you stop kind of elaborating on Chantige's order numbers. So could you just tell us from what's happening in the business, order book numbers and, you know, we've had deals with this as well. So could you just elaborate on that? So, Chanticleer, basically like you said, we don't kind of give any specific commentary on that, but the business continues to be strong. I would definitely say that, you know, Industrial is seeing some kind of, you know, some pressure because of the overall environment as well. But, you know, I think overall, we continue to be fairly strong and fairly bullish about that business going forward. Got it, sir. I mean, any particular order book number, sir, because last year, we had about 200 to our order book in, second quarter FY19, that's a management So are we around the same number? Have you increased the I think you asked that question. I said, you know, we don't specifically discuss the order book numbers anymore. Okay. Okay. Okay. So then, sir, I'll probably ask the revenue question then. So we are getting to a 70 crore quarterly run rate from a 60 crores quarterly run rate. Do we think the 70 crores revenue quarterly run rate is a recently sustainable number in New Year? Yes. We do. Okay. Obviously, some of this depends on the environment, right, and, you know, like I said, we are seeing kind of general, you know, it is it is a tough environment even for that business. So, you know, and I don't want to predict when the thing will pick up. But in general, is that doable? Yes. Got it. Got it. Thank you, sir. Sorry, sir. Last question, if I can squeeze in. Any the gross margins are kind of reduced. Is it general demand slowdown and therefore we are taking some price pressures? Yeah, yeah. So basically, that is right. The that is correct, right? So your your statement is accurate. Okay. Okay. Okay. Great. Thank you so much. Next question is from the line of Piyash Agarwal from GM Financial Limited. Please go ahead. Congrats on a good set of numbers. Yes. Thanks, Ash. Yes. I had a question on the engineering division. So it's it's, you know, pulled down sharp this quarter about a 28 percent, 29 percent revenue decline. So is this more of a function of the decline in production in the auto? So what's the outlook here as in it should get better right for you. Yeah. Yes. Like I said, right, I mean, you know, part of the challenges, we don't have a crystal ball kind of are able to predict when the market's gonna look up. The, you know, but what we continue to remain confident on is that we're using this cycle, in order to focus on all of the things that we started articulating last year. Right? And it's actually a great opportunity for us to focus quality improvement on productivity on moving more to the production system, you know, on looking at our logistics, looking at power, And, you know, it just gives us a lot more time to do that. Right? To your specific question on, you know, do I think second half is going to be better than first half, all of these things, you know, I think You know, like, it's like a it's a coin flip, you know, kind of. Honestly, I don't think anybody knows right now. So I don't want to really kind of speculate on that because I'm not gonna give you the right answer. I mean, it's all I'll say is my answer is a 50% chance of being correct. Right. Yeah. So, and, sir, you know, exports seem to have, again, you know, disappointed in the second quarter. I think it was doing alright in the first quarter. So Yeah. Yeah. Exports, definitely, there was a slowdown particularly, Europe and EU, has slowed down significantly, and we saw significant inventory build ups in the EU across most categories. That we export. And so what we have to now see is how to bring that back. And our belief is that the EU inventory situation is correct thing. Their year basically ends in December. And what most people tend to do is then stock up for next year. So, you know, I would say that, you know, that's encouraging from that perspective. Driven by a slowdown in the EU. Sure. So on margins, you know, you spoke about a 10% PBT in the next 2 years think each one we're already there. So is you know, would you like to revise that, you know, now, or the guidance? Yeah. I mean, I just think that, so, obviously, first is to sustain it and kind of lock into this. That's the first objective. But obviously, yes, right? I mean, as a number, if we kind of are able to speak at this number for a year, we will revise it up. Sure. Sure. Okay. If you're asking for a target and by when, I would say, you know, we'll set the next target at 12%. Sure. Few more questions. So the other expenses, you know, they're down about 20% year on year. So how much is it a function of a decline in top line and how much is, you know, at should, you know, cost cutting as in, you know, the non, the non required cost cutting, you know, how much would you attribute the the splitter decline in our expenses too? Yeah. Anshul. Yeah. So, a large part of it is volume driven, but there are also efficiencies which came in. So I would say also the decline may be around, 20% 20, 25% is related efficiencies. Sure. Sure. Okay. Lastly, you know, on the new products, you know, so I think you're you had highlighted 3 or 4 products, you know, or vision products truck, body, etcetera. So are you, you know, some sense, you know, how, significant can these 3, 4 products be for you? You know, are you, some color on these new products? Yeah. See, I I think and I mentioned this multiple times every time I articulate them. Which is, you know, the way you have to look at these, right, these products is kind of more driven by like you would do startups, right, which is, you know, you don't start measuring these products in the same metrics as others. Right? Like I've openly kind of said, you know, we're gonna do 10 of these over 3 years, and then, you know, only only 4 of them are gonna succeed. But the the way I look at it is, we continue to be very bullish about you know, the 3 that we've announced. And, you know, to us right now, the metric is not revenues, but, you know, do we feel like the actual opportunity is and we continue to believe that the opportunity is real in those 3 businesses. Got it. Got it. Got it. Got it. Got it. Got it. Got it. Got it. Got it. Got it. Got it. Got it. Got it. Got it. Got it. Got it. Got it. Got it. Got it. Got it. Got it. Okay. Thank you. Anyone who wishes to ask a question, you may press star in 1. Next question is from the line of Abhishe Ghosh from DSE Mutual Fund. Please go ahead. Yes, thanks. So could you help us either other income is higher in the current quarter? Is it related with the yield or is there anything else there? There was one final dividend from SGL, which was declared after Q4. So that doesn't receive in Q2. Okay. So about 7.8 crores would be attributable to that? Yes, what's it supposed? Okay, thanks. And we see a sharp decline in payables in first half of FY 'twenty And is that also somewhere that we have been able to get better pricing as far as the raw material procurement is concerned on account of that? How should one look I would say that part of it is also that we're we're basically, you know, buying less because, you know, we've been working with our inventory situation also a bit. And so that's also driven by the fact that we're just buying less right now on a lot of our business. Okay. So you've cut down on inventory as well as the, people's part of it, both is what seeing effectively. That's right. Okay. And so if you can just help us understand that given whatever slowdown that we have seen in the auto segment, how was your pricing with the OEM, kind of setting across? We have also seen a reduction in raw material but there's a sharp slowdown in the auto demand, which is effectively turning into a lot of discounts. So how is your pricing on a product basis, depending on with them? So besides of the, besides of the steel pass through, I would say in most situations, we've been able to hold pricing. What we're beginning to see is very interesting in the industry, which is, you know, we're beginning to see players who have, you know, weak balance sheets get a bit more desperate in the space. Right? And that's causing them to basically kind of, you know, try and grab more business through discounting and all that. But what we only see right now from what we can tell from the outside is that the balance sheets continue to the CDA. So actually, you know, that's why I think that, you know, if this environment continues for a long time, I wouldn't be surprised if you kind of begin to see some kind of, you know, I mean, because of that weakening, right, kind of the number, supplier base, you know, I don't know what I I would I would think that some kind of exits would have to be to happen, because of that. Right? But we can't get inspected and what others are doing. Okay. So what you're essentially saying is, as of now, whatever impact seen in the raw material prices, the same amount has been passed on, but nothing beyond that at least as we speak? That is always a little pressure, but we are not we're not not too much to handle. Okay. And, have you been able to form up as far as what is the CapEx that will incur? Because the in the cash flow statement that you have given out, I don't know if that's the correct number that CapEx seems to be a 106 odd because that what's the exact CapEx that have incurred in first half and like E20 CapEx? 90, 96 crores is what we spent in the 1st half. Yeah. Okay. And for the year, what is the number looking at? That is about 200 crores. Okay. Okay, sir. Thank you so much for answering my questions and all the best. Next question is from the line of Arun from Capital Markets. Please go ahead. I have a couple of questions on Shanti gears. Okay. Looking at the half yearly numbers of last 3 fiscal of Shanti gears, the H2 operating margin is lower than H1. Any stamp by more than 200 BPS, any specific reason for this transfer. Yes. I think this is much of, right? I mean, my general thoughts would be kind of that we keep this focus on TI. You know, because, obviously, Santigail has its own investor communication, and we do that as well. I would prefer that. But if you, what is, sorry, what is your question again? Yeah, the hedge of margin is for the last 3 years. The hedge of margin more than 2 100 BPS lawyers and H1 margin in the last 3 fiscal. Any specific reason for this kind of trend, the change in trend, and they will give trying to continue going forward? No, I don't have the answer to that question of the record. We can look into it, but I don't have the answer to that. So comparing H2 with H1. Father, this trend has happened only for the last 2, 3 years. Yeah. Yeah. No. We don't have the answer to that question. Any business change mix or something like that? Yet. That's what No, I said, like I said, sir, we don't have the answer to that question. So Okay. Now, the one, ma'am, the how is the optimism on why visibility value are seeing the cash in orders for DASH not to give? Somebody earlier just kind of asked the question on all of Like we said, we we don't we're not sharing the order book data anymore because we don't think that is the best reflection of what is happening in the business. Okay. Otherwise, you can show, or what is the status income for the HR incentive for Chanticleer? Again, we don't show segment will income at that level, but basically the service income is up significantly. Thanks so much. The next question is from the line of Sherry Mandoya from Unifi Capital. Please go ahead. Good morning. Thanks for the opportunity. So firstly, in the Metals division, you had highlighted, you know, the Railbase Industrial Chain And Finance Banking have done quite well. So if you could, please highlight, what kind of growth we have seen in these three areas and the contribution from these C segments to our revenues? So on an average across those C segments, I think we would have seen close to about our 40% growth. And the second in terms of contribution, they tend to be a higher contribution segments as well. So they're higher than the average for metal pump. Based on your current, you know, order book and the visibility that you have in these areas, do you think that these kind of growth rates are sustainable in the near term? Yes, we do believe that, at least in a couple of those businesses, we will continue to have high growth rates. You are highlighted about, you know, the gross margin in responding to the earlier question. But below the gross margins, if you could please highlight what further initiatives are there in the pipeline which could lead to, you know, further reduction in our operating costs? Yes. Like I said, no, there are basically the first, I mean, the first is just on quality. We started off this moment to go to EQM, and we're about 1 year into that journey. It's a 5 year journey. And our belief is that 5 year journey will will result in at least kind of a 2.5% improvement in PBT to sales. Right? The second is on productivity and that's linked to IoT where we basically started, you know, connecting all of our equipment across all of our plants, and that we believe, again, is going to result in significant gains where we started kind of looking at some of the data we've already seen, you know, close to, you know, 20% plus in gains and productivity. And we think that at least another 15 to 15 percent to 20 percent, you know, exists across that ecosystem. So that's a huge area of opportunity for us. And I would say that there's the significant work to be done in that area as well. The third effort that we have is on Toyota Production System, where we began to implement that in some of our, you know, in some of our operations, then we'll continue to roll that out across our entire system. What that does is kind of work first off on just overall inventory levels and, It also obviously helps on the quality and productivity side as well. But it also helps us significantly kind of improve our mix and our alignment within customer requirements. And the terrorism system initiative also is about, you know, I'd say 9 to 9 to 10 months. That again is going to be a 3 year plus initiative. And every year, it will give us gains, not just on the inventory and the working capital side. But also on the productivity and quality side as well. The 4th is what we started to do with freight and logistics. Where we've begun to get some gains in, but I still think that there's significant gains to to be had. We started looking at our warehouse, you know, structure infrastructure and kind of seeing what the optimal warehouse infrastructure is required across the country. There's a lot of work on kind of, you know, getting backhaul and reverse load. And getting better price efficiency across our entire network given our size and buy, which is, you know, close to 300 crores in spend across our system. So we see significant opportunity there that we'll continue to get. Power continues to be a very strong area for us where, you know, we think that a significant value to be had on that. We're putting, you know, a rooftop solar across all of our facilities that gets us a significant gain looking at basically how we reduce the overall, you know, cost per unit across our system. And then basically just start looking at, you know, just even from just an overall fixed cost structure, you know, what is, why do we need kind of, you know, why do we run processes the way we do, right? So we're looking at what we can do. A lot of simplification internally to reduce, thereof levels and make position making much more efficient. Right. So all of that is still, you know, there's significant headroom on that and still a lot of opportunity to come those areas and over the next, 3 years. Thank you. All the best. Thank you. Next question is from the line of Lakshmi Narayan from Tian Capital Advisors. Please go ahead. Yes, thanks. A few questions. First is pertaining to the tax rate reduction, post the tax rate reduction, some of the OEs have said that they would actually pass on the benefits So as a player, are you, being asked to part away some of your benefits that you get from the facts? I mean, how is it looking? The second question is related to the cycles and accessories. So there is, if I look at the 6 months, there has been a dip in the revenues, but at a segmental level, you the margins have been quite good. And my question is pertaining to shanti deals. Just want to know what percent of revenues come from, customized gears and what is the exports planned for Shopee gears? These are my three questions. Okay. So first to, ma'am, so you sorry. I missed what the question was on on cycle specifically? Cycles and accessories, if I look at on a 6 month basis, I see the the, revenues have, like, have come down. However, the margins at an EBIT level have at an absolute level has been quite steady in comparison to revenue dip. I just want to understand the dynamics of it. Is it because of institutional mix or what? That's my question regarding Sykes. So to your question, whether there's pricing pressure. I always think there's pricing pressure from the OEMs. I mean, the OEMs are very strong players in the country. And, you know, basically, you know, always are, you know, and are very kind of intelligent and astute players in this country. So I think it's a natural it's a natural kind of tension that always has to exist, that, you know, kind of, there will be kind of a desire to kind of reduce price But, you know, kind of the the bigger thing that we continue to kind of offer to differentiate is just a very high level of quality. In all of our products. And, you know, we continue to believe that if we can just stay very focused on quality, we can manage a slight price premium over our competition. Right? And so that's something that we continue to focus on, which is why we continue to maintain that focus on quality. And we are investing significantly and on getting better quality across our system. To your second question on cycles, yes, we did we did kind of significantly reduce our institutional business, but the gains and margins and cycles have come purely from efficiency. The team has put in a lot of effort to base please streamline, you know, cost across the entire mix, to basically get us, you know, just much better efficiencies and throughput in that business. And that's what's beginning to yield through. Like I answered earlier, we also think there's more headroom for growth in that business, in terms of both margin expansion. And then that's more kind of also leading to, you know, potentially a share growth over time. And, your third question was on shanti and that question, what are the Chanti questions? Yeah, customized. Yeah. So, yeah, in terms of non standard versus standard, it's basically is is much more of a custom shop. And, I would say almost 60 to 70% of our revenue comes from, custom, custom gear, gearboxes and gears. That's in terms of that number. Right. And and exports of, Shopee gears? Exports is fairly small at this stage. It's, I think about 4%. Yeah. 3 to 4 3 to 4 percent, but that is a business area for that. Okay. Thank you so much. Yes, thank you. Thank you very much. Next question is from the line of shyam Sender from Sandraang Mitchell Fund. Please go ahead. Yes. Hi, sir. Good morning and congratulations on very good operating performance, sir. Thank you, Sean. Yes. Sir, just on the metal forming side, you did mention the industrial chains have done really well whereas what the commentary we hear from some of the large bearing manufacturers on the industrial side seem to indicate that there's a slowdown there. How to how would you look at the industrial segment for the chains business going forward? Yeah. I say that, you know, we are very bullish about that segment. And I think there's a lot of opportunity both domestically and export. The we're beginning to scratch the surface on export, but we think that there's, a lot of expansion to come on the export side in that business. And domestically, we have a pretty good market share. We have almost, you know, kind of, I think close to a significant market share in that business. But, you know, what we see in that business is that the number of new applications that are coming out is increasing quite significantly, and that gives us a lot of, reason to be optimistic about growth on the domestic side as well. Okay. So in a sense, it is a market share gains that is bringing us growth. Is that, a fair assumption? So new application? Okay. Within the domestic as well. I mean, leaving the export side as export better side. That is correct. Understood, sir. On the railway side, sir, if you can talk of new initiatives, what is driving the strong growth here? Is it because of some gain in share from the weaker players or is it some structural shift happening to LHB coaches that is leading to this kind of good momentum on the railway side? So, Sean, there's a lot of pickup in demand from railways. I think we're very bullish and the government also is very kind of bullish and kind of how much they're going to focus on on improving the whole railway system. And, you know, I think the minister there has been kind of very proactive and very encouraging of growth. So we are very optimistic, and that optimism is kind of reflected across, you know, all of the railway facilities. What we have done is move beyond just ICS, here in in our way to kind of all the different locations, you know, in CF, RCF, all of them. And that's one side of it. The second is we started getting export volume. And the third part that is that we've also started doing work with a Metro guy, right? And so Metro is also included in the railway business for us. Okay. Okay. And Metals are both domestic and export, by the way. Ah, understood, sir. And, here, we do the panels and all that, right, for the coaches. That is Yeah, we're looking at additional components as well. But, yes, the panels is a high mainstay product. Understood, sir. Understood. Sir, just one more thing. On the aftermarket side, how is the aftermarket at behaving in the auto, specifically on the auto side of the change business, if you have to look at it? We're definitely growing significantly there. And we see a lot of opportunity to continue that growth. There is a certain amount of, aggression overall on pricing. But the good thing for us is that because we didn't have huge geographic spread, just improving our geographic spread itself is getting us growth in that business. But more than that, the team has been putting in a lot of work to look at kind of new products that are specific, the catering to the aftermarket. Significantly value adding in the aftermarket segment. So we're very we're again, right. I mean, that's the segment that I'm very encouraged by and I think it will continue to grow. For us because, you know, that's something that we're focusing heavily on today. Okay. But the underlying market is also pretty okay, sir, because we hear of some liquidity challenges with the dealers, but you're not seeing that kind of pressure there, is it? But it's something that we have to manage through. Right? And, you know, you know, we have a multi layer distribution infrastructure. And we're we're very careful about how we manage that. But is there a pleasure in our SME facing kind of, you know, working capital problems? Absolutely. There's no doubt about that. Okay. Okay. Understood, sir. So just one last thing on the working capital side. Is there, I mean, the question was asked before specifically on trade payables. Just want to confirm, is there any change in terms of trade there, in terms of the trade payables per se? No, there's nothing, no specific change. Thank you very Next question is from the line of Kasha Pajara from Axis Capital Limited. Please go ahead. Yes, Mr. Milan, just a couple of questions. Firstly, while you have guided earlier, the strategic intent to be a 10% PBT, sustainably, we are already there and seems that there is still a lot of, steam left in terms of, further cost reduction initiatives. And also cycle margins, which are still, you know, to go to the sustainable 5% mark. So at this point, would you kind of up this, trajectory, and, can our business potentially be at a point where, you know, PBT margins can be in the 12%, 15% kind of range. Over a 3 to 5 year period? Yes. Akashu, absolutely. You know, can we get there over a 3 to 5 year period? Absolutely. Like I said before, I mean, let let let us deliver, you know, kind of, you know, 10% over a, you know, kind of a sustainable time frame. But then after that, yes, we'll be pushed for, you know, 12 15%. There's no doubt. I mean, we have to we are looking constantly at mix what we can do to improve. But between mix and efficiency, you know, yes, we will definitely get there. Sure. And, the net debt is already now, you know, maybe at working capital levels or slightly, you know, below. So would I intend B to kind of continue, you know, you know, till we get any opportunity to grow inorganic or adjacency, would it be fair to assume that we'll actually, get to a zero debt position by the end of this year or next year? I said 0 debt by the end of this year is aggressive. You know, but you're right in terms of how we're looking at it. Which is, you know, we will continue to kind of invest the capital that's required for growth into the existing businesses. We will continue to invest in new businesses that require that capital for growth. But with both those sets of investments, we continue to believe that we can reduce our debt position over time. Right? That does mean that if we do not get into any kind of, you know, organic situations, we will become, you know, kind of, we will move to a situation where we are 0 net debt, or even kind of positive in terms of, cash. And, you know, but, you know, to your question on inorganic, it's something that we will continue to look at, but we don't look we're we're not going to look at any you know, you know, full price kind of, you know, acquisitions in the market. We will just continue to be opportunistic and kind of see what presents itself. But we're going to be very patient from that perspective versus look at doing anything in an audience. Sure. And, you know, in the first call, you kind of laid out your strategic intent that, 10% PBT close to 30% intent of, return on capital, 80% back to free cash flow. And over a 4 to 5 year period, thought process was that we should be close to 10,000 crores in terms of revenue. So maybe 16%, 17% compounding as far as revenue. So most of the parameters are going as per plan. Besides the revenue, which I understand is not in your and you still maintain that you don't crystal gauge, which is fair. But could you give a update on, you know, some new adjacencies that you know, and how they are progressing, like the TMT BAR initiative that you had spoken about, you had also said that there is, you know, something about the vision side. So there were 3, 4 initiatives you had kind of alluded to in the previous call. If you can just explain what's the outlook on some of those segments? Yeah, Sashif, I think I answered this earlier in the question sequence. The the the point, like I said before, is that, you know, the the the where you have to look at these are, like, startups, right, and you don't kind of measure them with the same set of metrics that you measure kind of existing companies. And so the way we look at them is that we feed them, you know, we've said that, you know, over time, we believe that, you know, we're gonna see 10 initiatives 4 of them are gonna be successful. And the way these work is that the 4 of us that are successful will be, you know, successful enough that they will basically give us you know, that 67% gap in growth that we look to fill with new businesses. Given that we continue to be bullish about the 3 that we have started. Well, 2 have started in 1, the factory is still getting built. The the the, so the the and, you know, so that one for for lens, the factory will be ready, at the end. So we're we're hoping to get production you know, in that March time frame next year. And, so get started with production in terms of March March April. So the end of this financial year. And we, you know, continue to be kind of very bullish about the the opportunity in those spaces as well, right? So I think kind of, from our perspective, we are quite encouraged by what we see there. And we're also encouraged by our adjacencies in our existing is that we continue to to to focus on and leverage for for more business growth. Sure. Okay, sir. Wish you all the best. Next question is from the line of Dhrupti Alvaraj from Midu Capital Management. Please go ahead. Yes. Thank you for this opportunity. Excellent set of results, sir. So I just need a small clarification. Since you talk about TBT margin guidance has been 10% of TBT margin. I just want this clarification that when you got like a lower top line, right? A PBT margin of 10% is achievable much faster because of the denominator effect. Is that understanding fair? So what I just want to understand is In terms of your own business plan, the absolute numbers that you must have targeted for EBITDA, cash flow generation, are those met the PBT margin could look higher because of a lower denominator. So just I hope you've got my question. Point. And, you know, like I answered, there's a couple of earlier questions as well. We have, you know, that's why I said, I mean, the important thing for us is to sustain this margin over time. Right? And internally also, we look at it and say like, listen, how can we sustain this margin over time? You know, are you right? Are you you right? In in to a certain end, yes, you are right in terms of, you know, like, that behavior does exhibit. But that's why also we constantly kind of keep taking a look at our free cash flows and return on capital employed because it's important. The more important thing that I look at is if free cash flow and PBT are moving in the same direction or not. And Sure. It would worry me if they were not. But your point is a good point. Very well, Nate. Point. And that is why I kind of continue to emphasize that, you know, give us time to actually kind of lock into this number over a sustained period. Right? I mean, and you have to be able to show the same number in a down cycle and an upcycle before you can actually believe that the number is locked into. Sure. Got it, sir. Thank you. Thank you so much, sir. And it's extremely inspiring to see and hear about, you know, things like IoT and all in a company like yours, I think it's exceptional. Thank you. Next question is from the from the line of Shriman Nudoria from UNFI Capital. Please go ahead. Yes, sir. Thanks again, sir. So you talked about, you know, newer applications of the industrial chain. Can you, briefly highlight what, what areas are we looking? Are we supplying, in these new applications, just to understand, are we replacing some existing vendors there, or is it, some new products that are getting developed? It's, I mean, like, domestic and export varies a lot. Kind of, you know, exports, there are all kinds of complex applications that India Indian chain manufacturers have traditionally not been in, and we've started getting into those applications. Basically, they are, you know, in the space of what I call adaptive chain, which means that you have a basic chain functionality, but then you add more functionality onto it by adapting the chain with different attachments onto it. Right? And, that is that is a space that is offering us tremendous growth. Outside of India. And we continue to, you know, so we will continue to develop innovative products and push it out into the into global markets from that perspective. In the domestic markets, there are different kinds of products. You know, one product, for example, continues to up a lot, parking garages. I don't know if you've seen, this multilayer parking. I don't know if you are from Mumbai, but Mumbai places that, you know, have no space at all. The more and more people are beginning to go vertical. And, these multi layer parking structure is basically, require industrial change as well. And so we have a good product that meet, you know, demand for things like that. And products like that are continuing to grow. Agricultural applications in this country continue to grow, with rotovators, seed drills, kind of all as application the agricultural area continue to kind of grow as well. So those are both, good segments, for us. And and domestically, we're seeing many segments that The 3rd segment that's growing significantly is food processing, you know, and the food processing segment requires significant, industrial chain applications as well. Hello? Hello? Can you hear me, sir? Hello. Can you hear me now? Yes. So secondly, on the fine banking division, what is driving the growth there? Has there been a new addition, which is leading to the growth in that division? Our existing customers are growing with us. The second thing with that division is that almost 40% of products are from, 40 percent of revenue comes from new products that we introduced in the last 12 to 18 months. And what happens with these products is that they have their own growth cycle because you usually start off with smaller volumes and then they start scaling after that. I'm blanking the segment where we're investing heavily in new product development. Happening is you go through your kind of entire people app and approval process with clients, and then those products begin to scale. So it's not one product, but several, several products in that area. We also have some, you know, stronger customer relationships that continue to grow significantly for us. And those are making products for the export market so we supply into them and then they make the final product and export it. These are global majors, and they continue to scale well with us as So contribution of the aftermarket, divisions in the H1 You're talking about aftermarket chain? No. For the overall business, the aftermarket, what was the contribution from that? Yeah. So we don't discuss the aftermarket numbers in specific. And, honestly, outside of chains, we don't have a huge aftermarket businesses. That's all kind of embedded in the change numbers. Thank you so much and all the best. Thank you. Thank you very much. Next question is from the line of Raghavan Raj, an individual investor. Please go ahead. Hello. Congrats for the fine set of results, sir. Thank you. Sir, I want to know about, I have been seeing many advertisements about the TA Metro TMT bus in regional newspapers. What sort of arrangement it is, sir, whether we are manufacturing out of it or it is only a marketing tie up, sir? I think I have basically we focus on quality on brands and the marketing products. Okay, sir. So we have a significant inputs into quality and the whole production. Okay, but the revenue revenue will not flow into our account, sir. We don't recognize the revenue, the full revenue on the product in Arizona. Okay, sure. And what is the volume of take in the last 3 months, sir? We don't discuss numbers by any of the new businesses. Next question is from the line of Shyam from Sandra Mitchell Fund. Please go ahead. Yes. Hi, sir. Thanks for the opportunity again, sir. On the X both front unit value to the inventory buildup that has hap that had happened earlier and which is now sort of destocking. So is this, are we seeing any order cancellations there or is it more of a function of a weak passenger vehicle market in Europe? How would you lead it? Because we have already we have always spoken of exports as being a very strong growth engine for us. If you can give some color on what is happening on that front, that will be open? Yes. So basically, what we're doing in the export market, Sham, is that we've developed 3 or 4 new products that are basically traditionally not I mean, they have not been where most of our revenues have come from. And those products, especially in the OEM side, have to go to their own approval cycles before they can start up significantly. So that will be kind of a slower ramp. And then once a pickup happens, that will help us tremendously. But, in terms of, you are right, weakening kind of, domestic demand in Europe is what caused the slowdown. And, like I like I said, there was overstocking by the distributor. So, basically, about half our export businesses, distributor, half as OEM. And the distributor side, the distributor and dealer side of that business, you know, had ended up overstocking, and so they were cutting back on inventories. And then basically what ends up happening is then they start talking up for the new year, and for them, the new year begins in January. So we'll start we'll start to see some of that begin to exhibit. But that's basically what caused the the slowdown for us. Okay, understood, sir. So this is largely on the tube side, right, engineered tube? Yes, we also do industrial change. So And, the, but those are our 2 biggest businesses, and now we're slowly starting to so I'd say, yeah, those are 2 biggest export businesses. Understood. So just on the CapEx front, we have guided for about 200 crores CapEx for the full year. Broadly, what are the areas where we are looking to add capacity? Because we've also cut CapEx from last quarter. We had guided for about 2.50 290 crores of CapEx for the year. From there, we have cut now to 200. Broadly, what are some areas that we are looking to add capacity, sir? So, the 3 biggest areas, obviously, tubes and engineering continues to be a very big area for us. Right? The second is, the, you know, the railways area where we're investing significantly. And the third will be kind of, you know, we continue to have strong relationships with some of our, you know, like, in our auto business, in our metal form auto business, we see a lot of opportunity there as well. So that's that's a business that we're continuing to invest in. Oh, okay. Metalform.gov, when you mean that is on the, door panels that we do for the That's right. Okay. Okay. Understood, sir. Understood. So one last housekeeping question, if I may, the unallocated capital employed is about 800 crores this quarter that has gone up from about 700 crore levels. If you can help us understand what is there in that, that will be helpful They're mainly comprises of the, the surplus funds which we have, which we have invested in mutual funds. Okay. Okay. This is basically we are holding on to debt, on NCDs that we basically can't close out. So Okay. So to offset that, we've invested in mutual funds to, you know, to tie that. I mean, till we can kind of pay down the NCD though. Okay. Okay. Got it, sir. Thank you very much, sir. Thank you. Next question is from the line of Sandeep Jain from ASK Investment Managers. Please go ahead. So specifically for the engineering division. Is this good enough now? No, sir. No. Is it good now? Hello? Mister James? It's still very simple. Yeah. Yeah. Very you can try, but it's still very, very, very easy. Is it good now? Yeah. Yeah. It's good. Yeah. So specifically for the engineering division, your top line came off by 28% margins went to 11.4%. Now these are the highest margins if I look at quarterly data since March 11. And even during that quarter, March 11, actually the top line went up by 37 38%. So what explains, this kind of performance and is it sustainable? Yeah. I think a couple of times, this question was asked. I I do agree with the point that's 50 BARDA, which is a down cycle does tend to have some of these events. So, I mean, effects where you basically start looking at it as a percentage basis and goes high. I think the more important thing for us is to focus on how much we can sustain over time. And I do think that in the engineering business, you know, margins will moderate from that level to slightly lower levels, if you think of an average over the cycle. Sure. Thanks. Thank you very much. I now hand the conference over to Mr. Kashapojana. Please go ahead. We don't have any further questions. So thank you, everyone. For getting on the call to understand tube investments. And thank you, Mr. Valayan and Mr. Mahindra Kumar, to answer all the questions patiently. And wishing you all the best for the remaining part of the year.